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Google gets premium accident insurance with Waze

What's Google getting for the $1.3 billion it's apparently paying for Waze that it couldn't accomplish with a multi-million investment of its own? Simple: buying the crowd-sourced traffic app is the internet business equivalent of a driver taking out premium accident insurance. Sure, Waze will make Google's map offerings more effective. The bigger value resides in keeping hard-driving rivals Apple and Facebook at bay in mobile search.

All the big internet firms in Silicon Valley, and even companies outside it, such as Microsoft, are trying to crack two challenges. The first is to capture the biggest possible chunk of the fast-growing local and mobile advertising markets. Both opportunities are worth salivating over - just look at Yelp's 70 per cent annual revenue growth or the fact that mobile went from zero to a third of Facebook's ad revenue in the past year.

Google's dominance of maps, and the trust its data has engendered among users, provides an advantage for the search company. If users want to know where to find a burrito, Google's mapping can give it a leg up on providing several nearby restaurants, reviews, directions and travel times. That erodes incentives to use competing apps. Fitting all this information together should help solve a vexing and persistent problem - people spend lots of time on mobile devices, yet the price of a mobile ad is still roughly half that of a desktop equivalent. The more local advertisers can reach close-by customers with targeted ads, the more this gap should disappear.

Waze is another piece for Google to fit into this puzzle. Its data on congestion and speed traps could improve Google's traffic information. That's important, since users have little tolerance for faults or mistakes in this area. Recall the difficulties Apple faced when it rolled out its glitch-filled maps last year, a stumble that precipitated a decline in its stock price.

The biggest attraction is defensive. Facebook, Microsoft, Yelp and others are gunning for the local and mobile ad pie. Apple's announcement today that will integrate its operating system into cars starting next year shows just how serious it is. As long as Google has the best maps and traffic data integrated into a collection of other useful data, the search engine has a big leg up.